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And whereas it would be highly advantageous to holders of stock below par to acquire a right of priority of redemption; inasmuch as the repeated application of large sums of public money to redeem any particular stock which is below par, would (cæteris paribus) raise the value of such stock in the market higher than any other stock bearing the like interest:
"And whereas it would be much for the interest of holders of stock bearing interest at 31. per centum per annum, to give up to the public a part of their present capital in order to obtain from the public the said right of priority of redemption :
stated, that in order to avoid the evils|public annuities in such order and course which must follow from a diversion of the of payment as they shall deem the most new Sinking Fund, he had drawn up a expedient: plan for that purpose: that he should say nothing about that plan, because he had already submitted it to the judgment of the public; but that if ministers (alluding to a speech of Mr. Pitt in the House of Commons) were of opinion, that that plan of his was either nugatory, or (when compared with the plan of the minister) uneconomical; that, if that were the opinion of ministers, they would do well to maintain that opinion in that House, where they should find a person prepared to give them a complete answer. That if those were the weak and shallow grounds upon which that plan of his had been rejected, it only proved, that ministers had rejected that plan, because they did not understand it. He challenged ministers te enter into the discussion of that plan in that House. He knew that he stood upon such strong ground, that he would venture, with confidence, to throw down the gauntlet upon that subject; and he called upon ministers, either on that, or on any future day, to dare to take it up. His lordship then stated, that he had a new plan, founded on the same general principles on which his other plan was founded, but extremely varied as to the mode of application. He then stated to the House the said new plan, which was as follows: Proposal of Earl Stanhope for rendering the Reduction of the National Debt permanent.
"Whereas, in order to establish a permanent Plan for the Reduction of the National Debt, and to make a lasting provision for the maintenance of the public credit, it is essential that the monies to be set apart for the redemption of redeemable public annuities, be invariably and unalienably applied for that purpose:
"And whereas effectually to insure the Reduction of the National Debt, in time of war as well as in time of peace, it is essential that the public faith be fully pledged by a compact being made between the state and the creditors of the public; and that it be an express condition of that compact that given sums of money to be set apart for the gradual redemption of the national debt, be applied towards such a redemption, by a fixed course of payment, and to no other purpose whatever:
"And whereas the public have the undoubted right to redeem the redeemable
"It might therefore be enacted, that books be opened at the Bank, in order to receive the names of such holders of stock bearing 3 per cent. interest, as should be willing to signify their consent to accept of 90l. for every 100l. of their present capital, whenever the public shall be desirous of redeeming the said capital at such price. And that the said books do remain open for the space of six calendar months from a given day.
"And in order that those holders of 3 per cent. stock, who might have neglected to signify such consent within the said six months, might have an opportunity to do it afterwards, a farther time of three caend of one year after the expiration of lendar months (to commence from the the said six months) be allowed for that purpose; provided always that those persons only be permitted to subscribe their names within the said latter period (namely, the said period of three months) who should forthwith pay to the public 1 per cent. upon the amount of their capital.
"And that all holders of this new 3 per cent. stock should be entitled to be paid off before any part of any other public stock whatsoever should be redeemed; and should moreover be entitled to be paid off by the following fund; namely, by an annual surplus of not less than one million; to which shall be added, all the public annuities for terms of years or for lives that may fall in, and likewise all dividends now payable on the principal or capital stock of such public annuities as shall at any time hereafter have been redeemed; and that the whole of the said fund be invariably and unalienably applied to the gradual redemption of the said new 3 per cent. stock, at the prices which the
said stock shall successively bear at market. And that the aforesaid fund be permitted to accumulate without limit, as long as there shall remain any of the said new 3 per cents unredeemed.
"But when all the new 3 per cents shall be redeemed, then the aforesaid fund shall no longer continue to accumulate; but, from that time shall become limited so as never to exceed two millions per annum, and shall thenceforth be applied, first to the redemption of the present 5 per cents, then to the redemption of the present 4 per cents, then to the redemption of all public debts which shall have been contracted after the 1st day of April, 1786, on account of any war or wars, or otherwise: and which shall bear interest at 3 per cent. per annum, or at more than 3 per cent. per annum; and, lastly, to the redemption of the present 3 per cents, if any such should then exist; and that the surplus of the said fund above the said two millions shall be disposed of as Parliament shall direct.
"Provided always, nevertheless, that if all the holders of the present 3 per cent. stock shall have signified their consent in manner aforesaid, that then, and in such case, the aforesaid fund, instead of becoming limited to two millions per annum, shall continue to accumulate without limit until all the present 5 per cents, and also all the present 4 per cents shall be redeemed.
"And that it be enacted, that if at any time a gain of one eighth per cent. upon the interest of any fund or funds which shall then by law be redeemable, can be obtained by opening books to receive new subscriptions, in order to apply the money so subscribed to the redemption of stock bearing a higher interest, that then, and in such case, books shall be opened at the Bank for such purpose, and that all interest so saved shall be added to the aforesaid fund to be applied to the reduction of the national debt; and that the new subscribed stock shall have the same right of priority of redemption, as the higher interest stock had, which should have been paid off in consequence of the said new subscription."
Earl Stanhope observed, that it ought also to be enacted, that the aforesaid fund, instead of becoming limited to two millions per annum, should continue to accumulate without limit, whenever the said fand should come to be applied to redeem any new subscribed stock which shall have
been borrowed as aforesaid, in order to pay off any stock bearing an higher interest; and that it might likewise be enacted, that the compact to be entered into as aforesaid with the holders of 3 per cent. stock, should be made subject to the new clause in Mr. Pitt's Bill, for the reduction of the national debt, (proposed in the House of Commons by Mr. Fox, and assented to by Mr. Pitt) namely, that the commissioners should be empowered to subscribe to any public loan, any of the monies placed to their account in the books at the Bank.
Earl Stanhope desired their lordships to take particular notice, that this plan did not pledge the public to redeem the 3 per cents at 90., but only to give the public a right to redeem the new 3 per cents at a new par of 90%., as the public have now the right to redeem the present 3 per cents at the present par of 100%. And that the commissioners appointed by Mr. Pitt's Bill would, under this plan, be empowered to purchase up, at market, the new 3 per cent. stock, just in the same manner as the commissioners were now empowered, by Mr. Pitt's Bill, to purchase up at market, the stock (whatever it was) which was below par; that is to say, to purchase stock at the then market price. His lordship then stated to the House his reasons for having proposed, in the aforesaid plan, that the stockholder should give up to the public a part of his nominal capital, and that the public should give to the stockholder the right of priority of redemption. He stated, that the stockholder had three things, which he might give to the public, and that the public had four things, which they might give the stockholder. First, that the stockholder might give the public a sum of ready money; but, that this the stockholder would not choose to give: secondly, that the stockholder had to give to the public a portion of his dividend; but that this was what the stockholder would also be unwilling to relinquish: and thirdly, that the stockholder had to give up a part of his nominal capital, which would not be to him any present loss, and which he would not consider as any material sacrifice. That the public, on the other hand, might give the stockholder, either ready money, or an increase of his dividend, or an augmentation of his nominal capital, or the right of priority of redemption. Of these four things, it was evident, that the right of priority of redemption, was that which
would best suit the public to give, inasmuch as it was that which was no loss to the public to dispose of, but which was a material advantage to the stockholder to receive. His lordship then stated his reasons for having proposed two periods for subscribing, with a year's interval between them; he said, that either much stock would, or much stock would not, be subscribed in the first period. That if much stock were subscribed in the first period, it became immaterial whether any were subscribed in the second. But that, if much stock were not subscribed in the first period, the price of the new subscribed 3 per cents would be considerably higher than the price of the unsubscribed 3 per cents, during the year between the two subscriptions; and that the inevitable consequence would be, that people would flock to subscribe, as soon as the second period of subscription should arrive. The reason, he said, for making persons pay one per cent. upon their capital, who should delay subscribing till the second period, was in order to induce the more persons to subscribe in the first instance.
new 3 per cents, inasmuch as the 50,619,9934. of new 31 per cents would have been lent to the public under the express condition of being redeemed, in a given course of payment, by the annual application of the whole of the new sinking fund.
Earl Stanhope then read to the House the following letters, which he had received from some of the first monied men in this country, and some of the most knowing men in the city. He paid the highest compliments to each of the persons whom he mentioned; and said, that such great authorities proved that this plan was practicable.
NOTE from Mr. Harman, partner in the capital house of Gurnell, Hoare, Harman, and Co. to earl Stanhope. "Mr. Harman, with his respectful compliments, acquaints earl Stanhope, that the best reflection which he is capable of making upon the subject, has confirmed his opinion:-That it is essential to the advantages proposed by the Bill for providing a fund for the reduction of the naEarl Stanhope then stated the reason tional debt,' that the best possible security for not permitting the new sinking fund be given for the faithful and unalienable to accumulate beyond two millions per application of such fund to those objects. annum, in the particular case stated in That the most effectual means of prothe above-mentioned plan, and for throw-viding this security, will be to institute a ing the unsubscribed 3 per cents remote compact between the public and indivifrom redemption. It was in order to duals. He also thinks that the plan which create the stronger inducement for the earl Stanhope has done him the honour to holders of 3 per cent. stock to accept of consult him upon, would obtain that obthe terms offered to them. His lordship ject, and that a very considerable number then explained that part of the plan by of the holders of 3 per cent. annuities which it was proposed to receive new sub- would be induced to assign to Government scriptions to pay off stock bearing an the option of redeeming them at the price higher interest. That part of the plan, of 90 per cent. upon condition that the he said, related to the five per cents and monies to be raised by the before-mento the 4 per cents. He explained this by tioned Bill should be applied to the puran example. Suppose, said his lordship, chase of such new subscribed stock, and that in some years hence, the interest of to no other purpose whatsoever, till the money should be at 3 per cent. a gain of whole of it be paid off.-Mr. Harman is 1 per cent. might then be made upon however become more diffident of this opithe 17,869,993 of 5 per cents which nion, from understanding that several would be 268,049., and a gain of 1 per persons with whom he has conversed, discent. would also be then made upon the sent from it, considering the advantages 32,750,000l. of 4 per cents, which would of such preference so very remote as be 163,750.; and the said two sums added scarcely to compensate for the surrender together, would make 431,799. which of 10 per cent. capital of the present anwould be annually to be added to the new nuities, however ideal the value of it may sinking fund. Independent of this prodi- be." gious advantage, the above regulation would also produce the following admirably good effect, namely, the rendering the sinking fund unalienable during the whole period of the redemption of these
LETTER from two capital Brokers to earl
"My lord; we conceive that it is highly essential, that the nation be comช
for the clause in the new Sinking Fund Act, which directs that the accumulation by compound interest shall cease, after the fund has increased to four millions, including the million surplus, and the lapsed temporary annuities. This will happen in 27 years, and the fund will then have paid about 57 millions; were the accumulating interests to be carried to the fund for 13 years more, it would increase to near 6 millions; and five millions in taxes might then be abolished; and the remaining million and a half (reserved for a new sinking fund) might possibly keep the public debts within the bounds of safety for ever afterwards."
mitted in an absolute bargain and compact with the public creditor, in order to make the plan of redemption permanent. Without which commitment of the public faith, much future advantage will not be likely to be derived from the plan of redemption, as a war might otherwise interrupt its salutary operation. We likewise think that a bargain formed upon the principles contained in your lordship's manuscript plan, will effectually pledge the public faith; and that by far the greater part of the present existing debt, bearing an interest of 3 per cent. per annum, will be converted upon the conditions mentioned in your lordship's plan. We remain, &c.
THO. ROBERTS and SON."
EXTRACT of a NOTE from other eminent
Brokers to earl Stanhope.
"They clearly understand the whole of his lordship's ideas, and are unanimously of opinion, that the greatest part of the 3 per cents would be subscribed in at 90, on his lordship's conditions." EXTRACT of a LETTER from Dr. Price to earl Stanhope. Dated Newington Green, May 15, 1786.
"My Lord; I agree entirely with those gentlemen in the city, who think that the greater part of the 3 per cent. stockholders would consent never to be redeemed at a higher price than 90, provided such terms as your lordship proposes are offered to them; that is, provided right is given them to be first redeemed by a sinking fund, not capable of being interrupted or diverted. It is obvious that the larger this fund is, the greater will be the benefit which they will derive from such a right, and therefore the more probable their general acceptance. I have nothing to add to what I have said in my former letters, with respect to the practicability of pledging the faith of Parliament to these stockholders in such a manner as to assure them of the unalienableness of the fund.-The plan which Mr. Pitt has adopted is that which I have been writing about, and recommending for many years. It would be an unspeakable improvement of it, could a method be discovered of making an interruption of it as much an injurious breach of faith with the public creditors as seizing their dividends; and I heartily wish your lordship success in establishing such an improvement.-I am sorry
EXTRACT of a LETTER from an eminent Merchant in the City, to earl Stanhope, dated 16th May, 1786.
"My Lord; I beg leave to return the inclosed paper to your lordship, with my earnest thanks for the perusal. As the great difficulty in establishing a permanent sinking fund, arises from the uncertain disposition of future parliaments; your lordship's plan will prevent any alienation, the additional aids) having been pledged, in consequence of the free revenue (with and even sold, to a part of the public creditors, for a valuable consideration. The object of rendering the sinking fund unalienable, is not only of the highest importance in itself, but is the sincere wish of every true friend to his country, and for which every proper sacrifice may be made.-The discount of 10 per cent. on the captital stock of the 3 per cents, for the purpose of conversion, is also a substantial and considerable benefit for the public, provided the whole, or the greater part of the stock, shall be subscribed: but it will not be for the interest of the public to pledge the sinking fund, or rather the priority of redemption, to a small part only of the proprietors of the 3 per cent. stock.-I am not competent to give an opinion whether the subscription from the holders of the 3 per cent. stock would be general under such a plan, or otherwise: if I must consider the subject as a person endeavouring to procure every advantage for himself, I should subscribe in the first instance a part of the old 3 per cents; and if the new 3 per cents. sold at a higher price than what I could obtain for the old stock, allowing for the abatement of one per cent.; then, but not till then, I should subscribe the remainder."
EXTRACT of a LETTER from an eminent Banker, to the earl of Stanhope, dated 19th May, 1786.
"My Lord; I have considered the plan your lordship did me the honour to communicate, and I see your great object is, to make the one million per annum, with its increase, a permanent fund for the purpose of annihilating the public debt.-I confess I see no means of rendering it absolutely unalienable, by any act of parliament, without a bargain taking place between the public and its creditors. Your lordship's plan would effectually prevent the application of the new sinking fund to the interest of any future loan, as might be proposed, by some future minister in time of war; and I think it very likely, on the terms proposed, that a great number of the holders of consolidated three per cents will become subscribers."
In addition to these weighty authorities, earl Stanhope stated, that he had often conversed with another of the most capital bankers in the metropolis upon the subject of this plan, who declared it to be of exceeding great consequence to the stockholders, as well as to the public, to insure the invariable application of the new sinking fund to the purchase of stock at market, and that in his opinion the greater part of the 186 millions of present 3 per cents would be subscribed in at 90, under the conditions of this plan; and that a very great number of them would be subscribed in, even at 85. He stated, that it was a great advantage of his new plan, that it might another year, be grafted upon Mr. Pitt's plan. That Mr. Pitt's was not defective so much on account of what it did contain, but on account of what it ought to contain, but which it did not. That it was his wish that Mr. Pitt's Bill should pass without a dissenting voice, in order to shew foreign Powers that, whatever might be the differences of opinion in this country with respect to politics, there was one subject upon which we were unanimous, namely, in our firm determination to reduce our debt and to redeem our finances. He stated, that people might wonder how he could reconcile it to his conscience to vote for so defective and so bad a bill; but that, as his principal objection to Mr. Pitt's Bill was, that a minister might be induced to involve this country in war, in order to seize upon a large surplus, that objection did not now exist for, that the surplus of the year
1786, was not that prodigious surplus, was
is the opinion of this House, that it is
Earl Stanhope concluded his speeh in words to the following effect: Our situation with respect to our finances is critical; but it is not that by any means which ought to incline us to despair. Neither is it that which ought to make us over sanguine. Despondency prevents men from taking the steps necessary for their good, and that from a total want of confidence in their success. An over-sanguine temper produces (though from an opposite cause) the same bad effect; because men are not led to take steps for their security until they perceive that there is some impending danger. We ought to view our situation (whatever it may be) with calmness and decision; and our minds will then be in a fit state to form a proper judgment.There is no situation, however unfortunate, but which affords some species of consolation; and such has been the goodness of Providence towards mankind, that circumstances of misfortune generally carry some consolation with themselves. The present situation of our finances affords a striking instance of this. If we were rich, the nation might be haughty; and ministers might be proud, and might be tempted to involve the nation in rash wars, from the facility with which they could obtain supplies. But, my lords, if the nation be poor, if it be deeply involved in debt, if it be loaded with taxes, and if it